Reviewing the energy hub concept

I am way over my head in this area so I won’t attempt to talk about specifics when it comes the energy sector. I’ll just make a few comments given the TJ story today about the possibility of a second or even third nuclear reactor.

First of all, Jeannot Volpe’s “can’t do” attitude is fascinating. He says “Why is it that we want to produce power for the States with a nuclear reactor when they’re not ready to do it (themselves)?” he said. “Build it in the States if you need power in the States.” That is a ridiculous statement prima face. You could easily say that about the massive electricity going from Quebec to the US. You could say that about any economic endeavour. Manufacturing, call centres, etc. Based on a very limited view, every type of economic activity would be best positioned within the market for that activity.

But, as anyone with a third grade education knows, there are other reasons why economic activity can be better positioned outside a specific market. Cost structures, access to land/resources, access to human resources, regulatory enviornments, etc.

Using Volpe’s logic, the Irving Refinery should be in the US. Why not? Why produce it here and then ship it there? How about manufacturing? Why produce it in New Brunswick if you just have to ship it there? Why use call centres in New Brunswick? Why not in Waltham?

Volpe’s argument is just plain silly and should have been countered in the TJ story. Maybe they could have got a First Grader to counter.

But it does represent an attitude that I have felt and heard in economic development circles for years. An ADM at the former ED&T department once told me “why would company x ever want to locate here”? Another pundit said it is “silly to think that an auto plant could ever be sited in New Brunswick”? (this despite the fact that every new auto plant in the U.S. in the past 20 years has been sited everywhere except Michigan)

It gives me the heebie jeebies just thinking that we have Volpe at the helm of the Finance Department for years. It’s no wonder we didn’t see any real private sector economic development (except for call centres) during his tenure in office.

The truth is simple. There hasn’t been significant large scale energy infrastructure development in the USA for a long time because of FERC. It’s extremely hard to get projects past the regulatory process. We have seen that with LNG, with oil refining and nuclear energy (in the face of US fears over terrorism).

Now, am I saying that New Brunswick (Canada) has less regulatory hurdles? Refer to my first sentence in this blog. I really don’t know the answer. The truth is that the Americans are jittery about nuclear power plants. So, there may be – and I stress may – an opportunity here – regardless of Volpe’s outrage.

However, Volpe diatribes aside, the government needs to study this stuff long and hard. Volpe is right that any new nuclear power plant would have to be viable for the long term – i.e. have secured markets for its power. The government needs to cross reference the plan with the rise of alternative energy sources. Any new nuclear power wouldn’t come on stream until at least 2016 and would have to have markets for at least 20-30 years (refer to my first sentence). So, one assumes that the world will look quite different in 2025 or 2035 than it does now.

Further, NB Power is among the most indebted power utilities in all of North America (last time I checked). There is a strong financial model that would have to be put in place to justify making NB Power the most indebted – by far – power utility in North America.

Finally, there is the opportunity cost. If the government is going to invest $2 billion in a nuclear power plant what is the total economic benefit? How many sustained jobs? What are the royalties (taxes) taken off the export of power?

And what are the alternatives places to invest that $2 billion? Should we invest in becoming a world leader in “cleantech” (called the biggest economic opportunity of the 21st century)? $2 billion would go along way to that goal. Should we become a North American hub for data centres (we would need some of that power)? $2 billion would go along way to that goal. Should we become the prime location in North America for nearshore manufacturing? $2 billion would go along way to that goal. Etc. Etc. Etc.

You see, it seems that New Brunswick is in a frightful box. We can’t seem to think outside of it to throw in a 1990s metaphor. Tourism and energy. Tourism and energy. That’s the sum total of our thinking these days.

I think we should limit the focus on tourism (low wage, seasonal jobs and little value add) and think about energy not in terms of how fast we can ship it out of the province but on how we can use that energy to stimulate real economic development here.

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0 Responses to Reviewing the energy hub concept

  1. mikel says:

    Again David, the job of the opposition is to oppose. You may be right about the pessimism, and that could well have made a big difference in Lord’s government, however, the end of your post simply mirrored what Volpe was saying.

    The fact is, that that is not the ‘defeatism’. The ‘defeatism’ is what the government is currently doing. Irving wants to massively pollute the environment for the sake of 1000 jobs. And remember, RIM is bringing 1200 jobs to Nova Scotia, in buildings that will be energy customers and yet have a pretty small ecological footprint.

    The nuclear reactors are simply corporate welfare. The utility is in debt primarily BECAUSE of nuclear power (and orimulsion). So to say “hey, let’s do MORE of that” is just crazy. The point is, they can do that because its government subsidized, in other words, its EASY. It probably wouldn’t even affect the credit rating, because as everybody knows, you don’t privatize a utility when its incurring debt-you wait til the construction is done and the cash is coming in, THEN you sell it off.

    And of course just look at the busineess model. The only time that NB Power made any money was when the US was hit with a major disaster, then Canadian utilities graciously stepped in with power sales for about twice the price.

    For energy regulations, I assume that was a joke. The US has seen no new refineries. Once again, OF COURSE they have tougher restrictions. Again, just look at LNG. In Maine every town along the coast had a referendum on whether to allow LNG terminals…all failed. Until they hit the reserve when they made huge promises of cash and jobs, and the town passed the referendum. Currently the process is still ongoing, the coast guard has to approve it, as well as several other agencies, ironically even Canada gets to take part in the process.

    In Saint John, well, nobody needs reminding. Irving conducted all the tests themselves. The provincial government is ga ga over the idea of another refinery. In Belledune we KNOW that the various levels of government knew about the massive levels of pollutants from Noranda for decades and did nothing, and didn’t even mention it to those who were there. Bennett of course didn’t even need an EIR to set up a soil treatment plant.

    So thats a complete joke, Canada has nowhere near the regulations that the US does.

    The US IS going ahead on energy, but most of it is renewables. I have no doubt they would LOVE to buy cheap power from New Brunswick where they no longer have to shoulder any risk. Nuclear is having another heyday, I’d recommend checking out BBC’s podcast and listen to the documentary “A year with the nuclear police”. For some reason people think that political systems will last forever, even though they are crumbling all over the world. The waste will be around in some cases for the life of the planet. And of course if you recall in 1990 an employee laced drinking water with heavy water.

    So I don’t agree that this is a ‘can’t do’ attitude. Like you say, everything is energy and tourism, the things which other groups are accomplishing or which are easy for government. Volpe had the can’t do attitude while in agovernment, just like this one does, thats simply a function of the government. Big plans while in opposition, but once in power its a different story.

  2. David Campbell says:

    I admitted a lack of knowledge in this sector. As for Volpe, his job is to ‘oppose’, I guess, but general statements like “Build it in the States if you need power in the States” to me are very worrisome. It is completely legitimate for New Brunswick to ‘serve’ U.S. markets for power, manufactured goods, IT services, etc. The real issues are around viability, environment, energy vs. other sectors for growth, etc. – not because we couldn’t service the U.S. market from here.

  3. NB taxpayer says:

    The legislation introduced by both Volpe and Mockler in the legislature is definitely fiscally conservative and sensible, however, he (Volpe) has found it challenging to relay those types of beliefs in public or to the press for some reason?

    I agree with David, if you’re going to oppose…oppose responsibly. Period.

  4. mikel says:

    You guys are taking issue with one sentence to oppose an entire argument. For NBTaxpayer, it IS fiscally conservative to say “government is not in business to create product for other markets”.

    For David, we aren’t talking about ‘legitimacy’. He didn’t say it was ‘illigitimate’, he said it was a bad idea and they can create their own power. In that, he is voicing the views of New Brunswickers who oppose the government-which is the nature of an opposition.

    Who in a letter to the editor has ever said its not ‘legitimate’? I’ve never heard that. I’ve heard it called stupid, irresponsible, and dictatorial, but never illigitimate.

    What’s more, he is RIGHT. IF the states want more power, they can build the infrastructure to do so. And of course THEY ARE. That’s the point. Of course the fact is that there can NEVER be ‘too much power’ because everybody wants CHEAP power. So New Brunswick could do like ontario and start churning out tons of pollutants from coal, hell, we could put kids back to work in coal mines and the US won’t care. If we’re dumb enough to completely forego all the strategies you mention in your original post and simply churn out cheap energy for them while incurring more debt, they’d be perfectly happy. It’s no longer a problem for them.

    Just because you don’t LIKE what a person says does not make it impolitic or irresponsible, it simply means you don’t like it. Of course everybody likes to think that their opinion is more than that to separate it from the pack. But he is fulfilling the function of his office, which involves saying what a considerable number of constituents want. Again, you may not like what they have to say, but that is a function of politics-not everybody agrees on policy, and clearly people don’t even agree on what is ‘responsible’.

    Since he is essentially saying the same thing as you, I think the hair splitting because he has a slightly different reason for saying the same thing as you is not necessary.